Samsung Takes Advantage of Vietnam’s Developing Workforce – Expands Number of Local Employees
HCMC – Samsung Electronics will soon employ more local employees than any other foreign company in Vietnam. By July, the South Korean firm will have expanded their current workforce from 85,000 to 100,000. Taking account of attrition and retirement, this will involve the recruitment of 60,000 new employees from the local Vietnamese workforce.
As well as encouraging Vietnam to develop its infrastructure and workforce to meet growing demands in the high-tech sector, this latest initiative by Samsung highlights key areas of concern for investors looking to take advantage of this promising Southeast Asian manufacturing center.
Samsung’s new recruitment program reflects broader trends in Vietnam’s labor market. Demand in the manufacturing sector rose sharply last year – orders from this sector accounted for 27 percent of the total during the final quarter of 2014, representing a significant jump from 17 percent in the second and third quarters.
Samsung began its Vietnamese operations in April 2009, when it built a manufacturing plant in Bac Ninh, east of Hanoi. The company has since built a number of facilities around the country, including a factory in Thai Nguyen. Samsung now plans to construct another plant at this location as well as further upgrading production and facilities at all its locations. In its fifth annual FAST500 report, the Vietnam Report Joint Stock Company, in collaboration with VietnamNet Online, ranked Samsung Electronics as the fastest growing firm in Vietnam.
Establishing a stable workforce
Though Samsung constitutes the largest foreign direct investment in Vietnam – recently increasing this by around 40 percent to US$12 billion – the company is not the only high-tech company operating in the country. Companies such as Intel, LG, Nokia and Foxconn also have a significant presence in Vietnam.
Vietnam’s low labor costs have transformed the country into a key Asian electronics manufacturing hub and luring production away from China. However, foreign investors should be aware of the challenges still facing the manufacturing industry in Vietnam.
Many manufacturers commonly face difficulties in establishing a stable Vietnamese workforce – workers here tend to change jobs regularly, particularly around the holidays. Following Vietnam’s lunar New Year (Tết), the country’s most celebrated holiday, many workers leave their urban, industrial jobs to stay at home or in the hope of finding a better position for the year ahead.
Samsung, Panasonic, and Denso are amongst the numerous manufacturers looking to recruit after the post-Tết, labor shortage. This typically involves incentives such as sign-up bonuses, financial rewards for travel, accommodation and seniority or welfare support for those with children or elderly relatives. Notably, these post-holiday recruitment drives can represent a significant addition to overhead costs.
Average salaries and productivity
Though recent annual increases to Vietnam’s minimum wage have worried investors, the Minimum Wage Adjustment for 2014 was significantly more moderate than in recent years. The country’s minimum wage ranges from ~US$100-$150/month (VND2.15 million-3.1 million), however, the average salary in the manufacturing sector can be anywhere from US $190-230 (VND4 million- 5 million).
Minimum wages in Vietnam are determined by the region the business is located in, these are as follows:
- Region I: VND 3.1 million (US$147)
- Region II: VND 2.75 million (US$130)
- Region III: VND 2.4million (US$114)
- Region IV: VND 2.15 million (US$102)
Expanding and skilled workforce
Vietnam has made remarkable progress in its gender equality initiatives, crucial to the expansion of the country’s workforce and improving labor productivity – two imperatives needed for Vietnam’s economy to sustain steady growth as its manufacturing industry develops. Samsung’s recruitment strategy looks to take advantage of this trend – the company predominantly employs female factory workers.
Samsung is also headhunting medium and high-ranking personnel including engineers and recent graduates for executive-track placement. The first 2,500 of these new recruits are expected to join by the end of March.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
In this issue of Vietnam Briefing Magazine, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations.
Tax, Accounting, and Audit in Vietnam 2014-2015
The first edition of Tax, Accounting, and Audit in Vietnam, published in 2014, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.
An Introduction to Doing Business in Vietnam 2014 (Second Edition)
An Introduction to Doing Business in Vietnam 2014 (Second Edition) provides readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in the country.
- Previous Article Using Vietnam’s Free Trade & Double Tax Agreements: New Issue of Vietnam Briefing Magazine
- Next Article Vietnam-Hungary Business Forum Seeks to Grow Trade, Economic Cooperation